Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. “Tax Citizen”?
http://t.co/IsmbLzUjQL
— Citizenship Lawyer (@ExpatriationLaw) March 4, 2015
My first reaction to the recent letter to IRS Commissioner John Koskinen from the Section of Taxation was excitement, as it seemed a good idea to get the issue of whether 877A is retroactive or not, solved once and for all. For over five years now, many expats have been in agony, knowing they lost their citizenship decades ago and yet many have been told that without a CLN, they might as well accept that they still are US citizens. This is simply intolerable. Now more than ever, we need to understand this as completely as possible.
I want to bring to your attention some posts that John Richardson has written over the last several months on this same subject. Trying to make this intelligible to those of us unused to the language of taxation and law is no easy feat. If we are to make reasonable assessments of our situations before choosing a course of action and/or tax adviser, lawyer or accountant, we need to understand what is involved. That is exactly the reason Brock was started; to read, research and share as opposed to simply allow others to take charge.
#1 “Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. “Tax Citizen?”
“This post is long and I (John) wish to summarize the purpose and possible (but not certain) conclusion of the post in a few simple sentences.
Here goes:
If you were born in the United States (and became a U.S. citizen at birth) who moved to Canada and:
1. Relinquished U.S. citizenship (likely by becoming a Canadian citizen) prior to June 3, 2004, without informing the U.S. State Department or applying for a Certificate of Loss of Nationality; and
2. Are hearing from the media and some members of the tax compliance community that you are either still a U.S. citizen or are somehow liable for U.S. taxes; then
You should NOT believe that you are still a U.S. citizen and/or are that you are subject to U.S. taxation without getting proper counselling. In other words, you should neither apply for a Certificate of Loss of Nationality nor file U.S. tax returns without a thorough investigation of your situation. You may or may not be a U.S. citizen who is subject to U.S. taxation.
Extreme caution is warranted. Please note that this post is NOT legal advice of any kind whatsoever. You meed to discuss your specific circumstances with a competent adviser of your choice.”
You can read the rest of this post here.
#2 – “The “plain language” of S. 877A – To whom does the U.S. Exit Tax apply?”
“Many Americans abroad are confused by the difference between “relinquishment” and “renunciation”. This post will explain exactly why the date of relinquishment matters. This post will make the argument that the “plain language” of the combined effects of S. 7701(a)(50) and S. 877A(g)(4) compel the conclusion that those with a “Relinquishment Date” prior to June 3, 2004 are NOT subject to the S. 877A Exit Tax.”
#3 – “The United States of America – One country two citizenships – Introducing the “Tax Citizen”
“What could be better than U.S. citizenship? Why not a second U.S. citizenship? The United States Congress rewarded U.S. citizens by giving them all a “Second U.S. Citizenship.” To be specific, on June 3, 2004 all U.S. citizens became U.S. “Tax Citizens.” Interestingly, the U.S. public never asked for “Tax Citizenship.” The status of “Tax Citizen” was simply conferred on them. “Tax Citizens” have no rights. They have only obligations. The obligation is pay taxes.”
#4 – “Renunciation is one form of relinquishment – It’s not the form of relinquishment, but the time of relinquishment”
“There is NO difference between “relinquishment” and “renunciation” (renunciation is just one form of relinquishment). For tax purposes, there is likely a difference between a “relinquishment” prior to June 3, 2004 and a “relinquishment” (including a “renunciation” after June 3, 2004.” Read here.
This is an extremely important subject. I do hope you take the time to read these posts and in the spirit of Brock, discuss and share ideas here. We are our own best assets!
following
I’ve often wondered if a situation could arise whereby a former citizen may have correctly submitted all paperwork, including 8854, but could still mistakenly be considered a tax citizen if the IRS lost the 8854 and hadn’t realised it had been filed. We never get full acknowledgement that we’re safely out!
@MonaLisa
I wouldn’t think that would necessarily be that big of a problem. One would simply resend it including proof of mailing the first time. The other thing is, since the 8854 is sent to both Austin and Philadelphia, it is highly unlikely both places would fail to receive it. Though I agree, it would be a great relief to have some kind of indication one is “out.” There’s always the Name-n-Shame list LOL
One of the things that really is unfair, on top of all the rest of it, IS this unclarity of status whether one relinquished decades ago or filed FBARs years ago with “no news is good news” the most one can hope for. There are no “wrongs” here. You take direct steps and comply and are left in no-man’s land. In the other case, when one is told directly by a US Consulate that in no uncertain terms, you will lose your American citizen by becoming a citizen of another country, what then, would there be to do afterwards? Hope or worry forever that maybe that won’t be the case? Of course not. You accept the consequences of your actions and move on. One would also have the reasonable expectation that if something more were required, that information would also be communicated at the time. The idea that a law can change with such drastic consequences some 40+ years later is bizarre. Having had a few hours now to consider the ABA Taxation Section letter, it is even more terrifying to envision Treasury/IRS could or will rule that 877A is retroactive. I always think that is unlikely given the way they still list/separate the different categories of requirements according to the laws that applied at the time when one expatriated. To think otherwise requires such an absurd understanding. I like the way John has given it:
What do you think?